Utility CEOs of the Year

 

by Rod Walton, Senior Editor

Bassham and Grimm Believe Teamwork Key to Leadership

Every year Electric Light & Power magazine names CEOs of the year for both large and small utilities. The task of doing so is never easy, with many strong candidates and enthusiastic, persuasive supporters nominating them.

This year’s winners are separated by thousands of miles, but they are connected by past achievement and openness to future change. Both met the challenges of market pressures and customer expectations. Both helped their utilities raise their renewable energy profiles. Their leadership styles reflected lifelong lessons learned.

Terry Bassham

Kansas City Power & Light

Robert “Bob” Grimm

Alaska Power & Telephone

The editors of Electric Light & Power selected Terry Bassham, CEO of Kansas City Power & Light (KCP&L) and its holding company, Great Plains Energy, as Large Utility CEO of the Year. This category is for utilities with 400,000 or more customers. KCP&L serves more than 800,000 customers in 47 northwest Missouri and eastern Kansas counties with a service area covering 18,000 square miles.

The Small Utility CEO of the Year is Robert Grimm, who leads Alaska Power & Telephone (AP&T). AP&T, which started a small regional provider in 1957, now serves most of the nation’s largest state area-wise.

Bassham joined Great Plains as chief financial officer in 2005 and became CEO in 2012. Grimm joined AP&T in 1972 and took leadership 12 years later. He announced in December that he will retire at the end of 2016.

Electric Light & Power’s Chief Editor Teresa Hansen presented the Utility CEO of the Year awards Feb. 8 in Orlando during the DistribuTECH awards dinner.

Prior to the awards ceremony, Electric Light & Power interviewed Bassham and Grimm.

EL&P: Tell us a little bit about your backgrounds, how you grew up and what led you into the power utility industry?

Bassham: I grew up in a small town of 500 in East Texas. I graduated fourth in my high school class and did not make the top 10 percent. I graduated from the University of Texas-Arlington where I received an accounting degree. Knowing I did not want to be an accountant by profession (had a pretty good GPA except in accounting); I applied to Law School and attended St. Mary’s Law School in San Antonio, Texas, where I clerked for the Western District of Texas Bankruptcy Judge. As a result, I took a position with a law firm in El Paso, Texas, as a bankruptcy lawyer. After a year or so, the senior partner in our firm representing the local utility, El Paso Electric, pulled several young associates into the company’s first rate case involving its partial ownership of the Palo Verde Nuclear Plant in Phoenix. That case led to a series of cases in Texas, New Mexico and before the FERC over the next eight years. I was hooked. After 10 years in practice, I joined El Paso Electric as its general counsel and have worked inside the industry ever since.

Grimm: I grew up in rural Washington. My father’s side of the family immigrated to the United States from Europe prior to World War I. I was blessed with an upbringing fostering self-sufficiency and strong work ethic. I was fond of all things mechanical and electrical, and loved taking them apart to see how they worked. This resulted in a hands-on approach that continues to challenge me. I was introduced to the public utility industry through family connections, and have remained on that path since 1972.

EL&P: Both of you started your careers in this industry several decades ago. When did you first realize it was changing, shifting from fossil fuels to renewables, from a generation focus to efficiency and demand response?

Bassham: After 20 years in the business, 10 representing El Paso Electric and 10 working for El Paso Electric as general counsel and later as CFO, I moved to KCP&L in 2005 to take the position of CFO. On one of my first meetings with my new CEO, he said we were focused on energy efficiency as a generation resource. I reminded him I was the new CFO and was troubled by the basic math around less usage, less revenue. He said to me, it’s good for customers and it’s good for the environment … that means we are going to be involved or we are going to get run over by it. Ever since then, we have seen exactly that.

Grimm, left, and AP&T employees Bill Squires and Tom Ervin, near AP&T’s Kasidaya Falls Hydro facility.

I am proud to say KCP&L led the charge for legislation in both our states to provide energy efficiency and renewable products and services through our regulated utility. And the same factors still apply; it is good for our customers and it is good for our environment; now we have made it good for our investors.

This year’s winners are separated by thousands of miles, but they are connected by past achievement and openness to future change. Both met the challenges of market pressures and customer expectations. Both helped their utilities raise their renewable energy profiles.

Grimm: First of all, you need to understand that rural Alaska is not connected to the national grid. Each rural community or cluster of rural communities must have its own microgrid. In rural Alaska, these microgrids historically depended on diesel-based generation. I need to admit that our reason for shifting away from fossil fuels was based upon some simple self-sufficient economic principals rather than government policy or mandates. In rural Alaska, every dollar spent that leaves the local economy hurts the local economy. If electric power can be produced using local resources and local labor, it strengthens the local economy, which in turn strengthens our company. When our shareholders make multi-million dollar investments in multi-generational renewable energy projects (primarily hydropower) it accomplishes several things. Not only does it stabilize production costs by providing a perpetual fuel supply (falling water), it uses a local renewable resource; dollars that previously left the rural community stay home. This simple principal benefits our shareholders, customers, employee-owners and the communities we serve. One of AP&T’s mottos is “Employee-Owned, Community Minded, Building it Together.”

AP&T is subject to the same disruptive market forces impacting all electric utility businesses. We continue to educate our customers on how to use our product (electricity) in the most efficient manner and to conserve energy, so as not to waste valuable resources. We also support our customers who choose to self-generate utilizing distributed generation resources, and who seek to participate in our net metering program in accordance with the regulatory environment in which we operate. We plan on de-coupling our regulated electric utility rates. We feel tariff reforms are necessary to empower others to utilize our microgrid systems without adversely impacting our shareholders.

EL&P: What recent achievement by your utility makes you most proud?

Grimm: AP&T’s employee-owner culture is made possible by an employee stock ownership plan (ESOP); a qualified plan under the Employee Retirement Income Security Act of 1974 (ERISA) that has allowed our employees to invest in the company and share in its success. The employees of AP&T currently own about 47 percent of our shares; this is considered a very high percentage of ESOP ownership.

Bassham: I am very proud of several strategic announcements we made in 2015 that continue to move us toward a cleaner energy future in a meaningful way. We introduced our Clean Charge Network, the nation’s first major electric vehicle network. We are partnering with our customers to install more than 1,000 electric vehicle charging stations in our region.

We also announced our most recent integrated resource plan that begins to phase out our older, less efficient coal units. Moving toward a more sustainable generation portfolio while still maintaining top-tier reliability takes time, and I’m pleased we made progress with this announcement.

EL&P: Who is your role model for leadership and why? How does that example relate to your own management style?

Grimm: Throughout my life I have been active in sports and was blessed with excellent coaches. This has had an impact upon my leadership style. To build a successful team you must develop a program that recruits and retains talent. Your team is made up of different positions. Placing talent in the correct position based upon their skills, attitude, training and experience is essential. Perhaps most important is ensuring that your team members are in a position to succeed. The concept of teamwork requires that all team members fulfill their obligations and responsibilities to the team and have the attitude to work with and support other members of the team to succeed, as no one person can do it all themselves (although some try). The role of the coach (CEO) is to provide a framework, resources and direction to the team and enable the team to execute. When this all comes together, your company is successful.

Bassham and other community leaders participate in a ribbon cutting unveiling a new, state-of-the-art substation in KCP&L’s urban core.

Bassham: I have always been impressed with the Sam Walton description of “servant leadership.” My job is to make everyone else’s job easier, not the other way around. We talk about “people first” at KCP&L. For that to be true you must have and appreciate diversity of people and thought. To truly appreciate and use that diversity of thought you have to listen-lots and lots of listening. It is so important that you give people the ability and structure to make good decisions. And, if the decisions don’t turn out so good, learn from them, don’t make them fear making another decision. In the end, it is not about making that one right decision, it’s about creating an environment that allows for making smart decisions that allow us all to grow and be successful.

EL&P: Only a few years ago much of the electricity generated in AP&T’s service areas came from diesel generators. Now you’re highly invested in renewables. What were the biggest roadblocks in making that shift?

Grimm: Our initial focus was to develop hydropower, which many do not recognize as a renewable energy resource. Our first challenge was identifying cost-effective sites that do not have unreasonably adverse impacts, that can provide our customers with short terms and long term cost advantage, and that can also support an appropriate return for our shareholders. The most economical projects were high head projects, whereby we siphon water out of perched alpine lakes. The low environmental impacts of these types of projects have allowed most of our hydropower projects to gain “low impact certification.” The next barrier is federal-level permitting and licensing. This is a long and costly process that requires many studies to establish base line and other data, even for small projects. After you have selected a low impact site and procured the necessary permits, licenses and authorization you need capital. Raising the necessary debt and equity to finance a multi-generational hydropower project is and remains our biggest challenge. The pioneers came through and picked up the “easy gold” years ago, developing the most cost-effective hydropower projects early on. Developing a new renewable energy project that is economically viable requires a highly creative approach to financing, and minimization of significant, daunting risks that are unique to Alaska.

EL&P: KCP&L had a busy year, too. You filed for a rate increase, announced that three coal plants were going to be closed and started a major electric vehicle charging program. All in all, would you rate how those things went?

Bassham: 2015 was a busy year on many fronts. As we wrapped up almost 10 years of strategic construction to position ourselves for the future, we filed rate cases in both our states. The cases were long and tough work, as always, but we received fair orders under traditional cost of service rate making. We continue to communicate and work with our regulators to recognize that the marketplace we operate in now has changed and regulation needs to change with it. Without traditional load growth and with continual mandated increases in cost, traditional ratemaking does not allow us a fair opportunity to fully earn our allowed rate of return. We will continue to work with our regulators and legislators to improve the structure and model.

Bassham, center, talks with other community leaders at substation ribbon cutting.

ELP: It seems like solar wouldn’t be much of an option near the Arctic Circle. Is hydropower the sole option for renewables there or is AP&T looking at other sources?

Grimm: It is interesting that you have dismissed solar for locations near the Arctic Circle. We have a solar installation in Eagle, Alaska, which is located just 118 miles south of the Arctic Circle. Based on an annual cycle, this project is projected to capture about 75 percent of the solar energy available in the “Sunshine State” city of Tampa, Florida. However, the difference is solar energy available near the Arctic Circle, home of the midnight sun, is much more seasonal than in Florida. An interesting fact is that April is the highest production as the snow cover reflects solar onto the arrays, increasing production.

In Southeast Alaska, we are blessed with significant hydropower potential that we have learned to develop. However, many of our locations in the interior of Alaska lack a nearby hydropower resource. This has allowed us to focus on solar and wind power operating in a hybrid manner with our existing generation as a future renewable solution. We also see that cost-effective storage will enhance this solution.

EL&P: Following up on that, some of your service area is 80 to 90 percent dark in the winter and almost 24-hour sunny in the summer. How does your utility adapt to that on a seasonal basis?

Grimm: The seasonal aspect of operations is also impacted by the extreme temperature range of up to 80 F in the summer to -80 F in the winter. Our electrical load increases in the winter months, which is when hydropower potential is at its lowest. We try to avoid new construction in the winter. From an operational standpoint, we must maintain electric service during periods of extreme cold, as electricity is essential to survival during severe winter weather. The local stores are open, schools are in session and life in these rural Alaskan communities continues just like any other rural community. The hardy residents of these rural areas adjust to the extreme climate quite well.

EL&P: Someone who nominated you for CEO of the Year commented on your “comfortable” persona. Your leadership team meetings are “quite a hoot,” we’re told. Can you tell us more about having fun on the job while accomplishing big things?

Bassham: We all work hard and spend a lot of time at work. What a shame if it was serious all the time and you couldn’t have fun. I have learned a lot in my three years in the CEO job. I started by insisting on decision through debate with the executive team. And man, did they take me up on it. I like to think our meetings are open and honest, but they are also challenging and fun-probably not your typical utility senior staff meeting, and that’s a good thing.

EL&P: In addition to operating in a unique physical environment, some would argue that AP&T also operates in a unique cultural environment. Under your leadership, AP&T has partnered with Alaska Native entities and tribes to form renewable energy joint venture companies. Please comment on these partnerships and why they are important.

Grimm: Some background is necessary before answering this question. Alaska is the largest state in the Union at about 424 million acres. In 1971, barely one million acres was private land. This was a serious handicap to building a sustainable economy for the Alaska. Under Section 6 of the Alaska Statehood Act, 104 million acres would eventually be transferred to the state. In 1971 the Alaska Native Claims Settlement Act tranferred 44 million acres to regional and village corporations owned by Alaska Native people, in exchange for extinguishment of their indigenous land claims. This transaction, which made construction of Alaska’s pipeline possible, was an alternative to the “indian reservation” model, which was extremely unpopular at the time.

In round figures, the land ownership in private hands increased to about 148 million acres previously controlled wholly by the federal government. This resulted in about 35 percent of Alaska in state and private ownership. Currently 65 percent remains under federal ownership and has been made into national forests, national parks, national wilderness and monuments, which are not readily accessible for development. Some areas remain predominantly under federal control-for example, southeast Alaska, where AP&T provides utility services. In southeast Alaska, which spans the same linear distance as Florida, 95 percent of the land is federally owned. By contrast, in Texas, 95 percent of the land base is in private ownership.

The point of this discussion is that even though Alaska is the largest state, the land base that is accessible for development is limited. This means that partnering with private land owners is essential. The largest private land owners are the Alaska Native corporations. Partnering with them makes good business sense. These partnerships are important; they have allowed AP&T to develop renewable energy in a sustainable manner on private lands which benefits our customers and shareholders, many of which are Alaska Native. They also help Alaska Native corporations provide for the well-being of Alaska Native people by creating new sources of revenue, and more affordable energy. There are sometimes cross-cultural issues and lack of trust that must be resolved. In my experience, however, it has been much easier working with Alaska Native entities than with the federal government.

EL&P: Terry, we’ll throw you a hardball question to close. The lights burned bright for the Royals and Kauffman Stadium in 2015, didn’t they? How did KC winning the World Series energize a city that had not seen a major sports title since 1985?

Bassham: I know that every team and every city enjoys the winning of a major sports championship. But Kansas City has already been on an incredible run with the resurgence of downtown, the expansion of an already world-class arts community, and our other sports teams, the Chiefs and MLS Champion Sporting KC. Overlay that background with a two-year run by the KC Royals, first sweeping into the World Series (in 2014) and leaving a runner on third base with two out in the bottom of the ninth in game seven, to winning the World Series the very next year, was incredible. To see the hundreds of thousands of people in blue line the streets for the post-World Series parade and celebration in Kansas City was something to behold.

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